Equinix(EQIX) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2025, the company reported revenues of $2,260 million, a 5% increase year-over-year, driven by strong recurring revenue growth of 7% [15][32] - Adjusted EBITDA margins reached 50% for the first time in history, with adjusted EBITDA of approximately $1,130 million [16][32] - AFFO per share increased by 8% year-over-year, totaling $972 million, exceeding expectations due to strong operating performance and lower income tax expenses [16][33] Business Line Data and Key Metrics Changes - The company closed 4,100 deals across more than 3,300 customers, resulting in $345 million of annualized gross bookings for the quarter [6][27] - Interconnection revenues grew by 8% year-over-year, surpassing $400 million in quarterly revenues for the first time, with a net addition of 6,200 total interconnections [22][23] - The Americas region led cabinet billing, contributing to solid MRR per cabinet yields [7][34] Market Data and Key Metrics Changes - The company noted a notable uptick in inter and intra-region sales, particularly in cloud and AI expansion activities [6][22] - The demand for digital infrastructure is being driven by trends in AI, hybrid, and multi-cloud strategies, with significant customer reliance on Equinix for these needs [10][14] Company Strategy and Development Direction - The company outlined its "Build Bolder" strategy focused on capital expenditure for capacity expansion, aiming to accelerate revenue growth [10][12] - Investments will primarily target major markets generating over $100 million in annual revenue, leveraging established customer relationships [12] - The company anticipates a path to double-digit revenue growth as the "Build Bolder" strategy becomes fully operational [12][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong customer momentum and a robust pipeline for Q3 and Q4 [20][21] - The company expects to see a meaningful step-up in non-recurring revenues in the second half of the year, particularly in Q4 [16][38] - Management emphasized the importance of addressing customer demand signals, particularly in AI and cloud connectivity [70][72] Other Important Information - The company has 59 major projects underway globally, including 12 XScale projects, and has expanded its footprint in Southeast Asia with the acquisition of three data centers in the Philippines [24][25] - The balance sheet increased to approximately $39 billion, with elevated cash and short-term investments totaling around $4.5 billion [34][35] Q&A Session Summary Question: What helped the interconnection adds this quarter and expectations for future metrics? - Management noted strong interconnection performance with revenues up 8% year-on-year, driven by cloud and AI expansion opportunities [44][45] Question: What is driving strong bookings momentum to start Q3? - Management highlighted broad-based activities across regions and segments, with strong pricing and intra-regional pickups contributing to the momentum [48][50] Question: Can you provide an update on the timing to stabilization in the Build Bolder plan? - Management indicated that the typical build profile is 18 to 24 months, but they expect to accelerate stabilization through fewer build phases and increased enterprise customer demand [57][59] Question: What is the outlook for ExScale leasing in the back half of the year? - Management confirmed a strong track record in ExScale, with 85% of facilities leased or pre-leased, and a robust pipeline supporting step-up in NRR [94][96]